Boeing labor groups remain on strike despite an offer for a 35% raise. But they can hold out for more and they will get it.
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Boeing Machinists Reject Contract, Continue Strike
Boeing’s woes continued this week with its machinists labor union rejecting the manufacturer’s 35% pay increase over four years.
“The International Association of Machinists and Aerospace Workers announced Wednesday night that 64% of its Boeing members voted to reject the company’s latest contract offer and remain on strike. The offer included a 35% increase in wage rates over four years for 33,000 striking machinists but no restoration of pension benefits.” – Associated Press
The six-week strike could extend for weeks as labor demands the return of its pensions. Boeing was already on its back foot following a delay that’s lasted years for the 737-10 MAX aircraft, a nearly decade long delay on the 777-8/9 stretch updated versions, and limited 737 deliveries amid quality concerns following the Alaska Airlines emergency exit incident.
The space division has also stranded two astronauts at the International Space Station due to reliability issues of its crew delivery rocket system, already years late and billions over budget.
Labor Holds All The Leverage
Union leaders know that striking workers can stay on the picket lines even longer. The latest Boeing union strike vote was less overwhelming but still emphatic at nearly 2/3rds of union members declining the Aerospace giant’s offer. But Boeing factory workers hold all the cards.
The Boeing strike causing the company to hemorrhage $50MM/day and this is on top of its other existing delivery struggles which include scrutiny and a delivery pause of the 737 MAX line. The company is in the process of acquiring Spirit Aerosystems, and a failure to deliver sold aircraft further impacts cashflow.
The strength of labor resistance is considerable. The manufacturer has announced the loss of 17,000 jobs, set a termination of its 767 freighter aircraft program and announced a further delay of its revised 777 models until 2026. The fight for a return to a traditional pension goes on as CEO, Kelly Ortberg, has been unwilling to include it in its contract proposals. To vote against a return to work despite fairly large pay increases and in the face of job insecurity demonstrates the group’s determination.
The company is raising money from investors at the moment. That money only gets more expensive as the company continues to languish, shrink, and push deliveries. The labor strike, a diminished stock price, merger, and regulatory pressure all contribute to make the labor position as strong as possible.
The Real Reason Labor Can Ask For More, And Get It
Boeing would not be able to replace its workforce if needed, there aren’t enough skilled workers to fill the roles especially not in the Pacific Northwest. But that’s not nearly as powerful as the macro-level concerns. The US is inside the final two weeks of a neck-and-neck presidential election and the executive branch would benefit from a resolution; the missing 44,000 jobs excluded from the employment numbers doesn’t help.
The reason why labor can ask for even more – and they will get it – is because the US is highly dependent on Boeing for exports. In 2023, Boeing was the largest single net exporter in the US with $22bn; the US trails only China in exports by a relatively narrow 10% margin.
Boeing is too big to fail. And because it is too big to fail, and too important to the US economy on a number of fronts, it will find the money to get bailed out no matter what. Therefore, labor would be stupid not to ask for more, stick to its guns, and push even harder. The longer the strike goes, the stronger their position and we know they cannot be replaced and Boeing will find the money – even if the government has to step in – at some point.
Conclusion
The Boeing strike could end right now. Workers voting down the new contract would likely change their tune with a return of their traditional pensions. Much like American Airlines couldn’t afford to pay more for flight attendants and also couldn’t afford not to, Boeing is in the same position but on an extreme scale. Politicians are likely to weigh in, and financiers will apply more pressure. Is a 35% raise significant enough? I would think that even over four years that would keep up with the reported inflation rates (a flawed metric to be sure.) But it seems that Boeing machinists are pushing for something far costlier and long term. Will it work? Yes, it will.
What do you think?
Yep , fight for return to a traditional pension for workers in Seattle .
Boeing can afford it easily if they cut undeserving benefits to the executive suite in Chicago .
Reinstating DB plans is a recipe for future bankruptcy. The union is asking for a ticking time bomb unfair to other workers and shareholders. And, smart, younger union members should fight for a DC plan that doesn’t put their retirement at risk when the DB debt comes due.
They can get anything they want now….those contracts will be immediately ripped up within 6 months when Boeing enters Ch 11.
Nice analysis.
Boeing management should just say it will be shipping all its factory equipment on the West Coast to China on two large freighters and will be quickly building its factory in China within 6 months. The dreamlifter will be flying the parts from spirit aero systems to China. They will keep their South Carolina factory. All the machinists on the West Coast are fired and banned from flying on Boeing planes which Boeing has to write into any new sales contract with airlines or lease companies.
If the govt doesn’t want that let them deal with the labor issue or pay shareholders $400 a share to buy the company and keep it in the U.S. The management can also break the company up and sell it in pieces.
What they shouldn’t do is give into union blackmail.
At this point, a requirement that requirement that someone can’t fly on Boeing planes isn’t such a bad thing considering that Boeing management has trashed the reliability record of the aircraft manufacturer. The motto now is: “If it’s Boeing, I’m not going!”
Boeing management are poster boys for crony capitalism failure: Making poor and shoddy products for short term profits that they run off with leaving shareholders and customers holding the bag. Everything about their management stinks. If the workers want more money, at least THEY earn it as compared to CEO’s who golf all day.
The SEC? needs to step in and undo the McDonnell Dougas merger, redo the whole board and management, and punish the shareholders and management. James McNerney and Dennis Muilenburg need to be indicted, criminally, for manslaughter and sent to maximum security prison, their family assets seized and their families sent to the workhouses.
Once a union supporter, the demands are now excessive enough to change my mind. Do the rank and file not comprehend the dismal future?
Not really – take too much and risk of insolvency rises. The airlines were bailed out post 9/11 but pensions were not spared cuts.
The “too big to fail” bit works both ways. You don’t think Boeing management isn’t also aware of this? To distract from their own massive failures, management would probably love the chance to blame BA’s failures, stock price crash, and eventual bankruptcy on labor/unions, and this provides an opportunity to do that, while knowing full well that BA will live on as a “too big to fail” critical piece of the US economy and military industrial complex.
Union/labor “holding all the cards” only works if the host company actually fears for its own existence.
Where’s Frank Lorenzo when you need him?